Doomsday? SocGen Predicts S&P to 450, Gold at $10,000

By Sam Mamudi

While most of the market seems to be getting behind stocks these days, even allowing for the occasional blip, there are of course some bearish folks out there. Not just bearish, but extremely bearish, and willing to fly in the face of the rest of the market:

With some rare exceptions…analysts don’t like to stand out from the crowd. It is dangerous and career-challenging. In that vein, we repeat our key forecasts of the S&P Composite to bottom around 450, accompanied by sub-1% US 10y yields and gold above $10,000 [an ounce].

That’s Albert Edwards, of Societe Generale’s global strategy team, in a note published today. He adds that bond yields will go “much, much higher” in the next three to five years, while U.S., U.K. and German yields will “converge to Japanese sub-1%.”

Edwards outlines the thinking behind his incredibly gloomy outlook:

My working experience of the last 30 years has convinced me that policymakers’ efforts to manage the economic cycle have actually made things far more volatile. Their repeated interventions have, much to their surprise, blown up in their faces a few years later. The current round of QE will be no different. We have written previously, quoting Marc Faber, that “The Fed Will Destroy the World” through their money printing. Rapid inflation surely beckons. But that will not occur without firstly a Japanese-style loss of confidence in policymakers as we dive back into recession and produce dislocative market moves.

As for gold, Edwards argues that (his belief in) a recession is just around the corner bodes well for the precious metal:

Gold corrected 47% from 1974-1976 before rising more than 8x to US$887/oz in 1980. A steep correction is normal before the parabolic move…holding gold is a bet against central banks competency and given their track record thats certainly a bet Id be happy to still take.

These are certainly bold calls, but Edwards is undaunted that he’s swimming against the tide. As he writes:

There are some ever-present truths in this business. Economists usually forecast a return to trend growth and will never forecast a recession. Equity strategists tend to forecast the market will rise 10% each year and will never forecast bear markets.

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There are 14 comments

APRIL 25, 2013 1:00 P.M.

dave wrote:

A brave man for a change.

APRIL 25, 2013 1:32 P.M.

robert giles wrote:

The Feb inflation rate of 2% is crazy, the Feb will not even address the hidden inflation rate. Three years ago I bought 5 sets of mens briefs for $6.61, four months ago I paid the same $6.61 and I got 3 sets of mens briefts. The same money and 40% less!!!

APRIL 25, 2013 1:35 P.M.

JJ wrote:

0 for the last 30 years ... maybe tomorrow ???

APRIL 25, 2013 1:37 P.M.

JJ wrote:

@ Robert Giles .... seriously ???

APRIL 25, 2013 1:44 P.M.

C.J. wrote:

brave and honest watch him get slamed, he has a following first group waiting for wisdom second group with a rope to shut him up....

APRIL 25, 2013 1:56 P.M.

C. J. Hall wrote:

Not sure how he believes that we can print money like crazy, yet we'll enjoy sub-1% bond rates....(including the UK?!? And Japan having announced it's doubling its' money supply? At least he has a sense of humor.)

Seems like we all logically will get caught up in the inflationary move. Major world economies are so interlinked today, it's like the cold war era "MAD" (Mutually Assured Destruction). I do think Gold will shine again, but $10k per ounce would mean a TOTAL collapse of most world currencies)

APRIL 25, 2013 2:25 P.M.

Che wrote:

Bitcoin is the new gold. Just watch.

APRIL 25, 2013 2:59 P.M.

Anonymous wrote:

Thanks for the report.

APRIL 25, 2013 3:00 P.M.

Anonymous wrote:

I get furious when Fed says no inflation.

APRIL 25, 2013 3:34 P.M.

Douglas Rife wrote:

Got it backwards as we now know that the basic cause of the financial crisis was financial deregulation, which allowed overleveraged, too-big-to-fail banks to go crazy with mortgage origination, securitization. There was mortgage fraud by the banks themselves on a very large scale and derivatives that made the mess even worse. These are the facts Wall Street wants you to forget. Wall Street wants to shift the blame to the Fed, as usual. The big banks and their employees, who covet their jobs, are never going to put the blame where it belongs. Better job security in blaming anything or anyone else.

APRIL 25, 2013 4:40 P.M.

truth wrote:

I think, that this aricle is well written. But it will only occur, if the big criminals in the capital market are in jail.
For example : Jpmorgan

APRIL 26, 2013 9:44 A.M.

REALLY ???? wrote:

Doug Rife - sure the banks share culpability, but so do a whole host of individuals who lied on their no doc loans. How about the blame for the appraisers who approved all the valuations? This was systematic stupidity - all the players in the system knew it was not sustainable from the Fed down to Joe 6 pack. The problem is no one wants to raise their hand and say "Yup, that was me, I messed up". So now the whole country is paying for the actions of the minority - albeit a rather substantial minority.

APRIL 26, 2013 7:43 P.M.

dethray6 wrote:

go to Martin Armstrong's site--read all his stuff-he is one of the gods-sounds like a couple of years before gold makes its big move

APRIL 28, 2013 7:58 P.M.

Bek376 wrote:

@dethray6, Thanks for the heads up on Martin Armstrong. Whether or not you agree with everything he says, his blog makes for some very interesting and thought provoking reading.

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Earnings reports, corporate strategies and analyst insights are all part of what moves stocks, and they’re all covered by the Stocks to Watch blog. We also look at macro issues, investor sentiments and hidden trends that are affecting the market. Stocks to Watch gives you the full picture of the U.S. stock markets, all day long.

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